Sector Report 15-Apr-13 RS PLATOU MARKETS AS Haakon VII’s gate 10 P.O. BOX 1474 Vika N-0116 Oslo, Norway Telephone +47 22 01 63 00 Telefax +47 22 01 63 10 [email protected]www.platoumarkets.com NO 942 274 238 MVA Shipping 1Q13 Previews Analyst: Frode Mørkedal Tel: +47 22 01 63 27 E-mail: [email protected]Analyst: Herman Hildan Tel: +47 22 01 63 53 E-mail: [email protected]Shipping 1Q13 Previews Investing in shipping stocks today is a bet on a cyclical recovery of freight rates over the next two years. Given the sharply lower fleet growth in most segments during the forecast period, we believe such a bet is attractive. The stocks that have done well the last months have been able to tie a story around acquisition of ships at historically low asset values, and we expect the winners this year will remain growth-oriented companies. We continue to favour product tankers and dry bulk shipping where demand growth is high and therefore should be able to absorb the overcapacity of ships faster than in other segment. Closures of refinery capacity in mature markets means trading distances for product tankers will increase, while China will be increasingly reliant on dry bulk imports because of constrained local production of iron ore and coal with new low-cost supply from Australia and Brazil opening up arbitrage opportunities. • 1Q13 market review:Product tankers enjoyed much better rates in 1Q, particularly for MRs that averaged $18,000 per day. We believe this reflects that US product exports are driving up trading distances, although seasonal refinery turnarounds helped as well. Dry bulk earnings remained at operating cost levels, although we have seen improved freight rates for the smaller Handysize, Supramax and Panamax vessels during March on the back of a strong South American grain season and rising port congestion. In the crude tanker sector, rates have struggled due to reduced OPEC production and declining crude imports to both USA and China. However, we expect the end of a heavy refinery maintenance period to lift Saudi crude exports in coming months, provided oil prices do not drop much further. The container shipping market saw flat box rates q/q but 16% higher y-y, which should help the container operators to avoid the dramatic losses seen during 1Q12. However, box rates have underperformed last year’s level during April. In our view this is due to too high fleet growth and still struggling volumes and demand from Europe. LPG and LNG carriers saw rates slip in the first quarter due to lower export volumes whereas chemical tanker earnings were up 4% y-y. • Recommendation changes:We have lifted our rating for Nordic American Tankers from Sell to Neutral following the recent equity raise, the alignment of management’s incentives with other shareholders, and growth clearly on the agenda with recent investments. We have also lifted Diana Containerships from Sell to Neutral after the recent stock price decline. We have changed StealthGas from Buy to Neutral following the strong share price performance. • Valuation: Tanker stocks (both crude and clean) today trade 1.4x NAV (simple peer group average) which we find implies around 16% higher asset values compared with broker quotes. Dry bulk stocks on the other hand trade on average 1.03x NAV. Since we are at the trough of the shipping cycle (with ship values historically low when inflation adjusted), we find that today’s NAV is not very meaningful to base an investment on since it is fair to price in a recovery of asset values. Based on EV/EBITDA, the tanker peer group trades at 7x ‘15e while dry bulk on average trades at 3.5x ‘15e (both sectors based on mid-cycle rates of $30,000/day for Capesize and $43,000/day for VLCC). We reiterate our view from our Shipping Quarterly February 2013 that we believe both dry bulk and tankers will bottom out in 2013 and see a gradual recovery towards mid-cycle rates in 2015. Our top picks include d’Amico Shipping, Frontline 2012, Golden Ocean, Navios Acquisition, Scorpio Tankers and Ship Finance. 80 85 90 95 100 105 110 115 120 apr. 12 jun. 12 aug. 12 okt. 12 des. 12 feb. 13 apr. 13 Platou Shipping index relative to key indices, rebased Platou Shipping (Rebased) OSEBX index (Rebased) Company Share Share price perf. Target price* 3m 6m 12m price Rec. AP Moller-Maersk 41760 - 14 % 0 % -8 % 50 000 NEUTRAL Awilco LNG 14.50 -20 % -29 % -53 % 4.0 BUY Baltic Trading 3.66 4 % 7 % - 19 % 6.0 BUY Capital Product Partners 8.55 7 % 0 % -1% 10.0 BUY Cost amare 15.80 3 % -2 % 7 % 16.0 NEUTRAL d'Amico International Shipping 0.44 3 % 36 % - 12 % 0.70 BUY D/S Norden 182.60 5 % 14 % 11% 39.0 BUY Danaos 3.84 7 % 24 % -5 % 3.5 NEUTRAL DHT Holdings 4.75 1% -25 % 431% 7.0 BUY Diana Cont ainerships 5.29 -24 % - 12 % - 19 % 6.0 NEUTRAL Diana Shipping 9.79 11% 39 % 17 % 15.0 BUY Dryships 1.88 - 15 % -22 % -48 % 3.5 BUY Euronav 3.24 -38 % -38 % -54 % 3.0 SELL Frontline 11.95 -43 % -46 % -71% 2.5 NEUTRAL Front line 2012 45.75 31% 69 % 85 % 10.0 BUY GasLog 12.69 1% -1% 6 % 14.0 NEUTRAL Genco Shipping 2.29 -43 % -41% -61% 1.0 SELL Golar LNG 35.61 - 10 % - 11% - 10 % 46.0 BUY Golden Ocean 5.86 9 % 29 % 9 % 1.5 BUY Hoegh LNG 49.00 -9 % 11% -7 % 12.0 NEUTRAL Navios Maritime Acquisition 3.38 27 % 22 % -4 % 5.0 BUY Nept une Orient Lines 1.16 - 16 % -1% - 19 % 1.2 NEUTRAL Nordic American Tankers 9.73 2 % -1% -37 % 10.0 NEUTRAL Norwegian Car Carriers 1.60 -24 % -25 % - 18 % 2.5 BUY Odfjell 27.80 -8 % 30 % -26 % 6.0 BUY Orient Overseas 48.55 - 16 % 2 % -21% 54.0 NEUTRAL Pacific Basin 4.62 -6 % 12 % 4 % 5.0 NEUTRAL Scorpio Tankers 8.49 10 % 39 % 15 % 13.0 BUY Ship Finance 17.44 -3 % 10 % 19 % 22.0 BUY StealthGas 11.69 24 % 63 % 89 % 12.0 NEUTRAL Stolt-Nielsen 116.50 -9 % 5 % 6 % 24.0 NEUTRAL Teekay Tankers 2.60 -26 % -31% -57 % 4.0 BUY Thoresen Thai Agencies 18.20 0 % 0 % 0 % 18.0 NEUTRAL Wilh. Wilhelmsen ASA 49.50 - 13 % 21% 25 % 10.0 NEUTRAL Wilh. Wilhelmsen Holding 165.00 - 12 % 20 % 6 % 37.0 BUY 12 % 12 % * The share price is in local currency, Target price is in USD except for d'Amico, Euronav, Maersk, Nept une Orient Lines, Norwegian Car Carriers, Orient Overseas, Pacif ic Basin and Thoresen Thai.
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Shipping 1Q13 Previews Investing in shipping stocks today is a bet on a cyclical recovery offreight rates over the next two years. Given the sharply lower fleetgrowth in most segments during the forecast period, we believesuch a bet is attractive. The stocks that have done well the last months have been able to tie a story around acquisition of ships athistorically low asset values, and we expect the winners this yearwill remain growth-oriented companies. We continue to favour product tankers and dry bulk shipping where demand growth is high and therefore should be able to absorb the overcapacity of shipsfaster than in other segment. Closures of refinery capacity inmature markets means trading distances for product tankers willincrease, while China will be increasingly reliant on dry bulk imports because of constrained local production of iron ore and coal withnew low-cost supply from Australia and Brazil opening up arbitrageopportunities.
• 1Q13 market review:Product tankers enjoyed much better rates in 1Q, particularly for MRs that averaged $18,000 per day. We believethis reflects that US product exports are driving up trading distances,although seasonal refinery turnarounds helped as well. Dry bulkearnings remained at operating cost levels, although we have seen improved freight rates for the smaller Handysize, Supramax andPanamax vessels during March on the back of a strong South Americangrain season and rising port congestion. In the crude tanker sector,rates have struggled due to reduced OPEC production and declining crude imports to both USA and China. However, we expect the end of aheavy refinery maintenance period to lift Saudi crude exports incoming months, provided oil prices do not drop much further. Thecontainer shipping market saw flat box rates q/q but 16% higher y-y, which should help the container operators to avoid the dramatic lossesseen during 1Q12. However, box rates have underperformed lastyear’s level during April. In our view this is due to too high fleet growthand still struggling volumes and demand from Europe. LPG and LNGcarriers saw rates slip in the first quarter due to lower export volumeswhereas chemical tanker earnings were up 4% y-y.
• Recommendation changes:We have lifted our rating for Nordic American Tankers from Sell to Neutral following the recent equity raise, the alignment of management’s incentives with other shareholders,and growth clearly on the agenda with recent investments. We havealso lifted Diana Containerships from Sell to Neutral after the recent stock price decline. We have changed StealthGas from Buy to Neutralfollowing the strong share price performance.
• Valuation: Tanker stocks (both crude and clean) today trade 1.4x NAV (simple peer group average) which we find implies around 16% higher asset values compared with broker quotes. Dry bulk stocks on theother hand trade on average 1.03x NAV. Since we are at the trough ofthe shipping cycle (with ship values historically low when inflationadjusted), we find that today’s NAV is not very meaningful to base an investment on since it is fair to price in a recovery of asset values.Based on EV/EBITDA, the tanker peer group trades at 7x ‘15e while drybulk on average trades at 3.5x ‘15e (both sectors based on mid-cycle rates of $30,000/day for Capesize and $43,000/day for VLCC).
We reiterate our view from our Shipping Quarterly February 2013 that we believe both dry bulk and tankers will bottom out in 2013 and see a gradual recovery towards mid-cycle rates in 2015. Our top picks include d’Amico Shipping, Frontline 2012, Golden Ocean, Navios Acquisition, Scorpio Tankers and Ship Finance.
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* The share pr ice is in local currency, Target pr ice is in USD except f or d'Amico,
Euronav, Maersk, Nept une Orient Lines, Norwegian Car Carr iers,
Orient Overseas, Pacif ic Basin and Thoresen Thai.
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1Q13 Expected reporting dates (source: Bloomberg)
TankersEURONAV SA April 16CAPITAL PRODUCT PARTNERS LP May 2DHT HOLDINGS INC May 3SCORPIO TANKERS INC May 3NORDIC AMERICAN TANKERS LTD May 6D'AMICO INTERNATIONAL SHIPPI May 7NAVIOS MARITIME ACQUISITION May 8TEEKAY TANKERS LTD-CLASS A May 17SHIP FINANCE INTL LTD May 24FRONTLINE 2012 LTD May 29FRONTLINE LTD May 31
Dry BulkBALTIC TRADING LTD April 30GENCO SHIPPING & TRADING LTD April 30DIANA SHIPPING INC May 3D/S NORDEN May 15THORESEN THAI AGENCIES PCL May 16DRYSHIPS INC May 29GOLDEN OCEAN GROUP LTD May 31PACIFIC BASIN SHIPPING LTD August 1
ContainerDANAOS CORP April 29DIANA CONTAINERSHIPS INC May 2COSTAMARE INC May 8NEPTUNE ORIENT LINES LTD May 14AP MOELLER-MAERSK A/S-B May 17ORIENT OVERSEAS INTL LTD August 8
Gas carriersSTEALTHGAS INC May 22AWILCO LNG AS May 23HOEGH LNG HOLDINGS LTD May 23GASLOG LTD May 28GOLAR LNG LTD May 30
Chemical tankersODFJELL SE-A SHS May 7STOLT-NIELSEN LTD July 3
Car carriersWILH WILHELMSEN HOLDING-A May 8NORWEGIAN CAR CARRIERS ASA May 31
* NAV and TP in local currencies for Maersk, d'Amico, Euronav, Neptune Orient Lines, Norwegian Car Carriers, Orient Overseas, Pacific Basin and Thoresen Thai.
Analyst: Herman Hildan Tel: +47 22 01 63 53 E-mail: [email protected] Analyst: Alex Gheorghe Tel: +47 22 01 63 47 E-mail: [email protected]
Weak container results – focus on Oil reserves update AP Moller-Maersk will report 1Q13 results on May 17.We expect focus to be on updated resource estimatesfor Maersk Oil and as always, the near term outlook forthe struggling container market. We remain NEUTRAL.
• 1Q13 expectations: We look for EBITDA of DKK 16bndown from DKK 18bn in 4Q12 due to lower results fromMaersk Line. Compared to preliminary Bloombergconsensus we are DKK 2bn lower on EBITDA level.
• Maersk Line: The container market in 1Q13 was muchbetter than 1Q12 when Maersk Line posted a negative DKK3.4bn net loss. Still, we look for a slightly negative resultof DKK -0.13bn. We factor in 6% lower volumes y-y but6% higher rates y-y (but flat rates vs. 4Q12). Comparedwith 4Q12 the result is negatively impacted by higherbunker costs.
• Maersk Oil: Updated reserves figures along withresources, perhaps with more granularity than previouslydisclosed, will be the focus with 1Q13 results. Whileproduction is expected to be weak at 232 mbbl/d, weforecast a rebound settling by 3Q13. More importantly, wewill be watching for changes in pace and costs indevelopments going forward.
Our 2013e EPS is maintained at DKK 4,380 for now. However, given the weaker than expected container market we see downside risk on our estimates should the May 1 container surcharges not be successful. We therefore maintain our Neutral recommendation.
AP Moller-MaerskSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (DKK): 50000 (unchanged)
Company descriptionDanish conglomerate with diversification across a broad range of businesses including world-leading positions in container shipping, tankers, terminals, tugs and niche offshore supply services. Comprehensive oil & gas activities. Listed at OMX Copenhagen.
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Waiting for contracts and financing Awilco LNG will report their 1Q13 figures on May 5th. Weare in line with consensus on estimates and expect mainfocus to be the newbuilds with 2H13 delivery.
• 1Q13 figures: We expect revenue of USD 10m andEBITDA of USD 5m, in line with consensus at USD 11mand USD 5m respectively. Only WillGas is on long termcontract while WilEnergy is reported by brokers to havefixed two spot voyages, to Brunei and West Australia. Weexpect $40,000/day, hence, lower earnings for theCompany q/q. WilPower is idle and will likely remain idle aswe enter into the seasonally slow period over the summer.Consequently 2013 estimates are lowered as we model inWilPower being idle going forward.
• Newbuildings and financing: Management has guidednewbuild contracts 3-6 months prior to vessel delivery,consequently we expect the first contract prior to summer.Duration and rate level will determine financing, but 70%debt financing should be achievable either fully throughbank debt or in combination with bonds.
• Valuation: With at least $80,000/day on the newbuildsone could argue for USD 225m value of the newbuilds.With scrap value of USD 20m on the remaining 3 vesselsand USD 36m contract value for WilGas we arrive at USD4/share after USD 280m of capex. Furthermore, the 2xnewbuilds alone should be able to provide USD 15m ofdividend capacity, assuming 15 year debt profile.
We lower target to USD 4/sh, but reiterate BUY.
Awilco LNGSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 4.0 (5.0)
Company descriptionOwns 3 LNG carriers built in 1983-84 and two newbuilds for 2013 delivery marketed for spot and term chartering in the LNG shipping market.
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Share price (NOK) in Awilco LNG relative to key indices
Awilco LNG
OSEBX index (Rebased)
OSE Transportation (Rebased)
Shareholders Shares VotesAwilco AS 33.7 % 33.7 %Home Capital AS 7.9 % 7.9 %Astrup Fearnley AS 7.6 % 7.6 %Uthalden A/S 7.6 % 7.6 %Free Float 66.3 % 66.3 %
Will dividends be cut or not? We are in line with consensus on earnings expectations,but see potential for dividends to be cut in light of theweak dry bulk market. Nevertheless, with a strongbalance sheet and low cash-breakeven we reiterate BUYand USD 6 target as we believe the dry bulk market willbottom out in 2013. • 1Q13 numbers: We expect revenue of USD 6m and
negative USD 0.2m of EBITDA, same as consensusexpectations. Consensus expects EPS adj. of minus USD0.23/share, in line with our negative USD 0.22/shareestimate.
• Dividend cut? The dividend policy of BALT is net incomeless maintenance capex plus non-cash compensation andsubject to reserves established by the board. Based on thiswe see the risk that dividends should be reduced to zero.However, due to the solid financial position of theCompany and the limited cash drain from dividends it maybe that the Company continues to distribute some cash toshareholders. If dividends are paid for 1Q13 it will be asignal that minimum dividends are USD 0.01/share, in ourview.
• Valuation: We estimate mid-cycle NAV of USD 7.6/shwhile EV/EBITDA target multiple of 7.5x on 20 yearaverage rates gives USD 7/sh target. However, due to themanagement agreement we set our target USD 1 lower toreflect the cost of terminating the agreement.
We reiterate BUY and USD 6/share target price.
Baltic TradingSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 6.0 (unchanged)
Company descriptionDrybulk shipping company established in 2010 and based in New York. Listed at NYSE under the ticker BALT US.
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Transparent cash flow coverage We expect CPLP to report their 1Q13 numbers May 2nd.We expect numbers above consensus and support therecent fleet additions, building support for long termdividends. BUY and target USD 10/share reiterated.
• 1Q13 numbers: We expect USD 41m of revenue and USD27m of EBITDA, somewhat above consensus at USD 39mand USD 26m respectively. The spread to consensus couldlikely be explained by our estimates including profitsharing contribution from some of the product tankers.
• Contract renewals: CPLP has 9 product tankers that areup for contract renewal in 2013 with average base ratesbelow $14,000/day. Consequently we expect contracts tobe renewed on higher rates, which could result inincreased unit distribution during the year.
• Growth: In1Q13 CPLP acquired two 5,000 teu eco-vesselswith long term contracts to Hyundai Merchant Marine atgross $29,350/day until 2025 for USD 130m. With 1.25%management fee on the gross rate we estimate return onequity of ~15% based on opex of $7,500/day, ~40% debtand 5% cost of debt with 25 year asset lifetime.We viewthis growth important for the Company as it offerstransparency on long term cash flow and dividenddistribution.
• Valuation: With operational cash flows financing thedividend we find 9% yield target fair, implying USD 10/sh.
We reiterate BUY and USD 10/share target price.
Capital Product PartnersSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 10.0 (unchanged)
Company descriptionThe CPLP fleet consists of 25 vessels, mainly trading in the product tanker market.
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Capital Product Partners
S&P 500 Index (Rebased)
OSE Transportation (Rebased)
Shareholders Shares VotesCapital Maritime 25.6 % 25.6 %Kayne Anderson Capital 12.6 % 12.6 %Crude Carriers 4.7 %
Company data (2013E)Share price (USD) 8.55No. of shares (m) 92.8Market cap. (USDm) 794Net debt YE (USDm) 446Enterprise value (USDm) 1,240
Dividend expectation is on a blended basis based on 68m common units and 15.6m Class B converted preferred units in 2012 and assumed conversion in 2013
Dividend yield of 7% We expect CMRE to reiterate 27 cents per share individend for 1Q13. However, as two containershipnewbuilds were delivered at the end of the quarter withfurther 5 in 2Q-3Q13, we expect dividend per share to be hiked to 28 cents next quarter, giving implied annual dividend yield of 7%.
• 1Q13 expectations: We look for revenues of USD 94m and EBITDA of USD 58m, down slightly from 4Q12 EBITDAof USD 60m. The Company has guided on 5% higher opex($7,150/day) for 2013. This is however 8% higher than4Q12. Should opex come in steady, EBITDA would have been USD 2m higher. We look for adjusted EPS of 20 centsand DPS of 27 cents.
• Investments: We estimate excess cash of about USD 130m which could go to investments. Assuming 70% debtwith 10 year contracts, this should be enough to buy ships worth USD 430m (e.g. four 13,000 TEU newbuilds.)
• Valuation: Trading at 10x ‘13e and 8x ‘14e EV/EBITDA seems rich when considering average age of fleet of about12 years. However, dividend yield of 7% supports on thedownside, and investment in new (or second-hand) container ships which can add to the distribution capacityshould be a positive trigger, in our view.
The market for asset providers is unfavourable, but CMRE is well positioned to grow at attractive prices. We reiterate Neutral due to fair valuation.
CostamareSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (USD): 16.0 (15.0)
Company descriptionCostamare Inc. is a non operating owner of containerships, chartering its vessels to liner companies and listed its common stock on NYSE in late 2010. Majority owned by Konstantakopoulos family and operates current fleet of 47 vessels including 10 newbuilds.
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Share price (USD) in Costamare relative to key indices
Costamare S&P 500 Index (Rebased)
Shareholders Shares VotesKonstantakopoulos Family 64.8 % 64.8 %
Continued fleet expansion d’Amico International Shipping (DIS IM) continued itsfleet expansion during the quarter by adding another 2newbuilds to the orderbook with 2014 delivery at highlyattractive prices.
• 1Q13 numbers: We expect USD 50m of revenue and EBITDA of USD 12m vs. consensus EBITDA expectation ofUSD 9m. Management was bullish on the 4Q12 conferencecall, citing low fleet growth on the back of the changingrefinery landscape, likely to be repeated on the 1Q13 call. However, we expect somewhat lower DIS spot rates as theCompany said on the last conference call that Januaryaverage earnings were $14,000/day. This is below ourestimated average 1Q13 MR earnings of $18,000/day. Weexpect average fleet earnings of $15,100/day for 1Q13.
• Fleet expansion: DIS added another 2 MR newbuilds to their orderbook in March, to be built in Vietnam butdelivered by Hyundai Mipo (Korea). Industry sources saythe technical management of DIS holds unique quality,hence we see limited quality risk for the newbuilds.
• Valuation: We estimate current NAV of EUR 0.55/sh, increasing to EUR 0.7/sh with newbuild parity. At EUR0.7/sh EV/EBITDA is 6x while the theoretically fair targetmultiple indicates EUR 1/sh target in 2015 on 20 yearaverage rate of $18,500/day. However, due to low freefloat and Italy listing a discount seems likely.
We reiterate BUY and EUR 0.7/sh target.
d'Amico International ShippingSector: Marine
Recommendation: BUY (unchanged)
Target price (EUR): 0.70 (unchanged)
Company descriptionItalian pure play product tanker company focused on MRs, current fleet of 25 owned and 6 eco newbuilds. Listed on the Milan Stock Exchange.
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d'Amico International Shipping
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OSE Transportation (Rebased)
Shareholders Shares VotesD'AMICO Intl SA 74.1 % 74.1 %
Company data (2013E)Share price (EUR) 0.44No. of shares (m) 429.9Market cap. (USDm) 248Net debt YE (USDm) 215Enterprise value (USDm) 462
d’Amico International Shipping S.A. (DIS) is one of the ten world main owners in its industry segment with a long history of over 60 years, and one of the few pure Product Tankers players
Expect higher full year guidance DS Norden is expected to report 1Q13 numbers on May15th. We expect the low 2013 guidance from the last report to be upgraded and see high upside potential forDNORD as the market is expected to bottom in 2013. Weexpect management comments to be bullish in terms ofbuilding upside for a recovery, in line with the signals at a lunch presentation in our offices during the quarter.
• 1Q13 numbers: We expect TCE income of USD 218m and EBITDA of USD 16m, in line with consensus expecting USD18m of EBITDA.
• 2013 guidance: Management guided USD 0m EBITDA for Dry Cargo and USD 25-45m for Product tankers and Group EBITDA of USD 15-45m on the 4Q12 presentation. Management told us at a lunch presentation that theguidance was based on a depressed FFA market inFebruary, on the back of a recovery since then we find itlikely that the guiding will be upgraded in 1Q13.
• Valuation: We estimate DNORD NAV at DKK 223/sh, up from DKK 214/sh a month ago due to higher asset values.Management said in the last report that they believed assetvalues have bottomed out and implemented a sharebuyback program of USD 30m as long as the share price is below NAV (DKK 213/sh at 4Q12 report). Regardless, wefind earnings more important and find EV/EBITDA of 3.2x‘15e as attractive in light of the strong balance sheet. OurUSD 39/sh target implies EV/EBTIDA of ~4.5x.
We reiterate BUY and USD 39/sh target.
D/S NordenSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 39 (unchanged)
Company descriptionDanish dry bulk major founded in 1871 that operates more than 100 bulk vessels including long-term charters. Has a large newbuild orderbook in addition to a product tanker exposure . Listed in Copenhagen under the ticker DNORD.
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Little happening while deleveragingDanaos is expected to report 1Q13 figures April 29th. We expect somewhat lower results quarter on quarter dueto idle vessels. The problem for the stock is that theCompany is unable to grow unless new equity is raised. Lacking company specific triggers, the share needsmarket momentum to lift the price, which is unlikely tohappen in 2013 given the poor supply-demand balance.
• Earnings: We expect flat time-charter market in 2013 vs. 2012 (about $10,000/day for 4500 TEU vessels). We lookfor EBITDA of USD 107m and net profit of USD 11m in 1Q.
• Valuation: We estimate nominal EBITDA backlog of approx. USD 3.6bn. At the end of the 9 year duration, thefleet would be 18 years of age on average, or approx. USD1.7bn of value. The net present value of this stream plusterminal value at 8% is USD 3.3bn. Compared with current debt level of USD 3.3bn there is little equity value based on the firm backlog and residual value. However, including re-chartering of the approx. 25-30% open days, we find fairDCF value of $2.3 per share. Our price target of $3.5 pershare reflects EV/EBITDA 7.7x ‘14e and 6.6x ‘15e.
Danaos is essentially using 90% of all cash flows to repay debt. The goal is to deleverage from 7.7x net debt/EBITDA in 2012 to below 6x (likely in 2015) before dividends can be reinstated. Unless new equity is raised to acquire new vessels we see few triggers in the near term for the share price, hence we reiterate Neutral.
DanaosSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (USD): 3.5 (unchanged)
Company descriptionDanaos Corporation is one of the biggest indepenedent owner of containerships. The Non Operating Owner is engaged in chartering out its vessels to operating companies on long term charters and has a current fleet of 62 vessels with further 2 on order.
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OSG legacy settled, growth next? DHT has been through a busy quarter with sale of the OSG claim and 3 more vessels entering the spot market.However, with the OSG settlement concluded the focusmay turn to growth as we believe the crude tankermarket will bottom out in 2013. We reiterate BUY andraise our target price to USD 7/sh, reflecting the impactfrom the OSG settlement.
• 1Q13 numbers: We expect DHT to report revenue of USD 13m and EBITDA of USD 3m, below consensus at USD 14mand USD 5m respectively. Overseas Ann, Newcastle andLondon entered the spot market in 1Q13, consequently we model in USD 14m higher working capital.
• Settlement: DHT entered into an Assignment of Claims related to the claims against OSG, where Citibank acquiredthe USD 52m claim for 33.25%. USD 6.9m will be paidinitially and the remaining once the claim has been allowed by court. This lifts our NAV by USD 1.1/share, hence thehigher target price.
• Balance sheet: DHT has no scheduled debt repayments until 2015, generating an industry low cash-breakeven of $14,000/day. However, the Company has repaid debt to stay in compliance with covenants, which may be amendedas the Company turns focus to growth ahead.
• Valuation: We estimate DHT NAV at USD 7.7/share and 2x EV/EBITDA on 20 year average rates, including a ratediscount on older vessels.
We reiterate BUY and increase TP to USD 7/sh.
DHT HoldingsSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 7.0 (6.0)
Company descriptionUS Listed tanker company formed in 2005 after spin-off from Overseas Shipholding Group. Owns 5 VLCCs, 2 Suezmax vessels and 2 Aframax vessels with ~11 years average age.
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DHT S&P 500 index (rebased)
Shareholders Shares VotesAnchorage Capital Group 32.0 % 32.0 %
Upgrade to Neutral Since we downgraded to Sell in February, the stock hasdeclined 25%. Valuation now appears fair but we findconsensus expectations for both earnings and dividendstoo high. Charter renewals will be concluded at much lower levels and the Company is likely to cut thedividend from 30 cents to 15 cents, in our view. Given ayield of 11% even at the halved dividend payment, wechange to Neutral.
• 1Q13 expectations: We expect little change in the quarterly figures, with EBITDA of USD 6m and EPS of 4cents. However, we believe DCIX will cut the dividend to 15cents. Looking at consensus figures, EBITDA for 2013 isUSD 24m which is too high compared with our USD 14m.DCIX has 3x 4,700 TEU vessels that are 22-23 years of age currently on charter to Maersk at $21,450/day that runsout during May 2013. We have assumed these are renewed at a lower rate of $10,000/day.
• Low leverage: DCIX has low leverage at 50% LTV (USD 92m credit facility divided by charter-free value of USD 183m). DCIX’s cash-break even is on average $11,500/day, according to our calculations reflectingessentially opex and interest costs. Further growth requires new equity, in our view.
Weaker earnings and the structural risk for tonnage providers with old assets are factors pulling the stock down. However, after the recent sell off the stock is now in Neutral territory, hence our change of rating.
Diana ContainershipsSector: Marine
Recommendation: NEUTRAL (Sell)
Target price (USD): 6.0 (unchanged)
Company descriptionDiana Containerships (DCIX US) is a US listed non operating owner founded in 2010 to own and operate containerships and pursue containership acquisition opportunities. The company owns 10 vessels.
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Predictable growth, but weak Q1 We expect 15% q/q drop in revenues for 1Q13 and~33% lower EBITDA compared to 4Q12, in line withconsensus. We still recommend to BUY DSX as webelieve the dry bulk market will bottom out in 2013. Wesee substantial earnings upside as the market recovers,which should result in the Company implementing adividend policy when operational cash flow allows for it. • 1Q13 numbers: We expect revenue of USD 41m and
EBITDA of USD 15m vs. consensus expectations of USD42m and USD 16m respectively. The Capesize vessel Norfolk completed its charter in 4Q12 at ~$72,000/day andhas entered a new contract at ~$10,000/day, explainingUSD 6m of the USD 7m expected q/q revenue decline.
• Fleet growth: DSX recently acquired a 2005 built Capesize, bringing the fleet to 35 vessels by year end compared to 25 vessels a year ago. On 20 year averagerates the acquisition will be repaid in ~3.3 year, hencehighly accretive in a recovered market. DSX had USD 6mof net debt by 4Q12 and USD 447m of cash, consequentlyplenty of capacity for further growth.
• Valuation: The DSX NAV has increased to USD 8/sh, up USD 0.5 from March due to somewhat higher asset values.More importantly, we estimate USD 0.92 free cash flow pershare on 20-year average rates in 2015. Applying 8% yield target gives USD 11.5/sh. However, with further growth we see additional upside as the Company can double theircurrent fleet without new equity.
We reiterate BUY and USD 15/share target.
Diana ShippingSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 15.0 (unchanged)
Company descriptionGreek drybulk company listed at NYSE and lead by Simeon P. Palios. Diana operates 10 Capesize and 22 Panamax vessels plus 2 Capesize (Newcastlemax) newbuilds for delivery 2012. Strategy to charter out long term.
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Earnings improvement in 1Q13 Key for Dryships’ earnings is ORIG in our view, as thisrepresent ~80% of the EBITDA on a consolidated basis.Recent sale of ORIG share by DRYS improved theliquidity position, but we suspect that the final outcomeof the orderbook would be termination of deliveries.
• 1Q13 numbers: We expect DRYS to report revenue of USD 286m and EBITDA of USD 101m vs. consensusexpectations of USD 298m and USD 112m respectively. Weestimate Shipping EBITDA of USD 19m and Ocean RigEBITDA of USD 83m.
• Ocean Rig numbers: Earnings continue to be affected by yard stay and mobilization, mainly for the two HE rigs.However, as we move further into the year, all operationalrigs save for the Eirik Raude will be on long-term contracts allowing for more stable operations and cash flow. The Leiv Eiriksson is expected to commence its contract on April15th, but is likely to be delayed as the rig has yet to receiveAcknowledge of Compliance (AoC). An eventual start-up is expected to be a positive catalyst for the stock.
• DRYS: 2 tanker newbuilds have been terminated, and management is working to cancel the dry bulk fleet of 10vessels, a likely scenario in our view or alternatively sold.
• Valuation: With ORIG at target USD 24/share our NAV increases from USD 2.8/sh to USD 4/sh. We believe underlying values will be reflected in the share price asORIG secures contract and the shipping cycle recovers.
We reiterate BUY and USD 3.5/share target.
DryshipsSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 3.5 (unchanged)
Company descriptionGreek shipping company owning 36 bulk vessels, 7 tankers plus 10 dry bulk newbuilds and about 59% of Ocean Rig. Listed at NASDAQ under the ticker DRYS.
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Company data (2013E)Share price (USD) 1.88No. of shares (m) 424.8Market cap. (USDm) 799Net debt YE (USDm) 5,034Enterprise value (USDm) 5,832
Description of adjustments: Sale of assets, agio/disagio and gain/losses on financial instruments. Number of shares includes dilution from convertible preferred shares.
Improved results on lower costs We expect Euronav in 1Q13 to have generatedunderlying similar TCE revenues as in the prior quarterbut expiry of high-cost charters helped reduce costs.
• Rate expectations: We look for VLCC spot rates of $17,000/day vs. $15,000/day in 4Q12. Although Euronavunderperformed the market in the prior quarter with VLCCearnings of $12,800, we assume results in line with themarket for 1Q13. The Suezmax spot vessels are assumedto have generated $13,000/day, up from $11,000/day asaverage for the market and Euronav’s $8,500/day during4Q12.
• Fewer charter-ins: Euronav has now reduced their TC-in fleet to 1 VLCC and 20% of one Suezmax. In November2012, Euronav terminated the VLCC TI Guardian which was supposed to run until Oct 2013. The cancellation reducedcharter-in costs with USD 13m or USD 4m per quarter.
• Sale of newbuild: The last Suezmax newbuild, the Cap Isabella, was sold for USD 54m in March 2013. This wasthe same as the remaining capex. Still, debt repaymentsfor 2013 total USD 207m of which USD 87m representsmaturity of liabilities that we assume are refinanced. IfEuronav is successful with this, the Company should avoida solvency crisis but the risks remain high, in our view.
With unattractive valuation and no immediate rebound for the tanker market expected, we reiterate our SELL recommendation.
EuronavSector: Marine
Recommendation: SELL (unchanged)
Target price (EUR): 3.0 (unchanged)
Company descriptionTanker company operating VLCC and Suezmax crude tankers. Its VLCC vessels are mostly traded spot as part of the Tanker International pool while most of its Suezmax vessels are tied to long term charter agreements. Based in Antwerp and listed at Euronext.
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SFL payment in 1Q reduces cash We expect Frontline’s numbers to come belowconsensus and focus to be on how the Company willmanage its liquidity situation through 2013. However,with more than USD 100m of FRNT shares andtermination of the Suezmax newbuilds, we see the mostpressing liquidity situation to happen in 2015 when the convertible bonds mature.
• 1Q13 numbers: We expect revenue of USD 57m and EBITDA of USD 7m vs. consensus at USD 56m and USD11m respectively. We expect FRO spot rates of$17,000/day for VLCC and $13,500/day for Suezmax rates, marginally down from 4Q12. We expect USD 7m loweropex q/q, mainly due to lower SFL compensations.
• Cash drain: FRO paid SFL and KG owners the annual cash sweep in March, estimated to USD 49m which willsubstantially reduce the cash position of the Company and likely result in further liquidity concerns.
• Valuation: As FRO only owns access to vessels chartered from SFL for a limited time period, we find the bestvaluation approach to be a DCF spread between our rateexpectations and the charter cost. Current share pricereflects our rate expectations until 2015 and $36,500/day for modern VLCC vessels and $30,500/day for 10 year oldvessels until maturity of the contracts. With USD 110m ofFRNT shares to solve liquidity issues we find currentvaluation fair and consequently reiterate Neutral.
We reiterate NEUTRAL and USD 2.5/sh target price.
FrontlineSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (USD): 2.5 (unchanged)
Company descriptionBermuda based tanker owner operating crude tankers in the VLCC and Suezmax segments. Listed at NYSE and OSE under the ticker FRO. Fourth largest shareholder in U.S listed Overseas Shipholding.
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Analyst: Frode Mørkedal Tel: +47 22 01 63 27 E-mail: [email protected] Next report date: 31.05.2013 Disclosure: RS Platou Markets acted as Joint Lead Manager in the USD 210 million private placement of shares conducted in May 2012 and the USD 310 million private placement of shares conducted in January 2013.
Approaching vessel delivery We expect FRNT to report 1Q13 numbers end-May. During the quarter another VLCC should have beenterminated while more vessels may have been added tothe orderbook. The first eco-design vessel of 50 vesselson order will be delivered in 2Q13, lifting earnings until end 2015 when the last vessels are delivered. Wereiterate BUY and lift our target price to USD 10/sh,based on our belief of continued growth which will beaccretive on dividend capacity by the end of 2015 whenwe expect rates to be back to the 20 year average.
• 1Q13 numbers: We expect revenue of USD 17m and EBITDA of USD 8m vs. consensus at USD 18m and USD 6mrespectively. Vessels on the water have outperformedpeers, and we expect average VLCC rates of $20,400/dayand Suezmax of $13,000/day.
• Financing: FRNT is fully financed based on 70% debt financing of the USD 2.1bn orderbook as net equity raises2012/13 and receipts from the VLCC termination is ~USD650m. However, we expect the Company to continuegrowing aggressively which will likely result in additional equity raises ahead.
• Valuation: FRNT is valued at 15% free cash flow yield to equity (FCF/equity) on 20 yr average rates, fully invested.Our target reflects a 12% target. We calculate ~30%FCF/equity on 20 year average rates from additional orders based on current newbuild cost, hence, with continuedaggressive growth the final yield will likely be higher.
We reiterate BUY and lift target to USD 10/sh.
Frontline 2012Sector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 10.0 (8.0)
Company descriptionBermuda based tanker owner operating 10 crude tankers and with substantial orderbook of fuel efficient newbuilds within product tankers, dry bulk and LPG. Strategy to become the leading global commodity shipping company within 3 years
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Low risk with dividend growth GLOG has been busy in 1Q13 with both vessel ordersand deliveries. We expect the Company to report higher than expected 1Q13 numbers and see potential forhigher dividends ahead with vessel deliveries. • 1Q13 numbers: We expect GLOG to report revenue of
USD 25m and EBITDA of USD 14m vs. consensus at USD22m and 12m respectively. GasLog Shanghai was delivered end-January, ahead of schedule. Regardless, we still lowerour 2013 EBITDA as the Company guided on unchangedSG&A in their latest investor presentation.
• Busy quarter: In February the Company ordered another 2 LNG vessels with 1H16 delivery for USD 410-420m. This increased our fully invested EBITDA by USD 47-48m. GLOG holds another 4 options at Samsung, though we believenew equity is required to exercise this. GLOG alsorestructured the contract on Hull 2017 (2013 delivery). The duration was extended from 6 to 8 years where the initial 3is unchanged and for the remaining 5 years the vessel willbe in the spot market 5 months during the year. Webelieve these months are likely during the low season, butwith strong cargo volume growth in 2016+ we expect a tight LNG market unless newbuild orders pick upsubstantially in the coming 1-2 years.
• Valuation: We estimate fully invested FCF/share of ~USD 1.6/sh in 2016, or ~12% yield on current shareprice.However, taking into account time-value and dividend level uncertainty we find current share price fair.
We reiterate NEUTRAL and USD 14 target price.
GasLogSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (USD): 14.0 (unchanged)
Company descriptionGLOG currently operate 14 LNG carriers, 2 fully owned, 1 with 25% ownership and 11 vessels owned or leased by BG Group. Additionally GLOG have 8 newbuildings
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GasLog
S&P 500 Index (Rebased)
OSE Transportation (Rebased)
Shareholders Shares VotesPeter G Livanos 51.0 % 51.0 %John S Radziwill 11.5 % 11.5 %Onassis Foundation 7.2 % 7.2 %Alyeska Investment Group 3.8 % 3.8 %Free Float 49.0 % 49.0 %
The cash burner We share the consensus view which expects a record weak quarter, with EBITDA approximately 10% of the quarterly interest cost. 4Q12 cash is sufficient to cover ~3 quarters at current cash burn, despite lenderswaiving debt instalments in 2013. SELL and USD 1/shreiterated as a recovery will benefit lenders and notshareholders or convertible bond holders.
• 1Q13 number: We expect USD 41m revenue and USD 2m of EBITDA, in line with consensus expecting USD 42m andUSD 3m respectively. 4Q12 cash was USD 73m and withlimited cash flow from operations and quarterly interestpayments of USD 22m this means that on a run-rate basis GNK will run out of cash by 4Q13. However, we expectrates to improve in 2H13, but not enough to reduce thedebt level by a meaningful amount. The capital structurerequires refinancing in our view, which will be painful for both shareholders and convertible bond holders. We notethat convertible bonds are currently trading in the low 30’s.
• Valuation: We see limited value for both shareholders and convertible bond holders. With negative NAV of ~USD364m and limited liquidity we see few alternatives otherthan to realise losses. On 20 year average rates EBITDA ofUSD 250m should be generated, pointing to an EV of USD1.7bn which indicates positive shareholder value. However,shareholders are unlikely to be willing to fund the liquiditygap until that point.
We reiterate SELL and USD 1/sh target price.
Genco ShippingSector: Marine
Recommendation: SELL (unchanged)
Target price (USD): 1.0 (unchanged)
Company descriptionDrybulk shipping company founded by Peter C. Georgiopoulos. Operates 53 vessels in all drybulk segments. Established in 2004 and based in New York. Listed at NYSE under the ticker GNK.
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The FLNG deadline approaching We expect GLNG to report their 1Q13 number late Mayas usual. We are ~10% above consensus and expecthigher numbers q/q, in line with guidance from the4Q12 report. We expect low utilization on Golar Mariaand Golar Spirit in 4Q12 to be reversed, resulting in q/qearnings growth, unlike consensus.
• 1Q13 number: We expect USD 110m of revenue and USD 84m of EBITDA vs. consensus at USD 107m and USD 76m respectively. We believe that our USD 2m miss on EBITDAin 4Q12 was due to higher cost as the Company preparesfor delivery of the orderbook. Consensus numbers mayreflect still higher costs which may explain the difference inexpectations. Golar Maria has been employed throughout 1Q with USD 6m EBITDA contribution. Furthermore, asboth Hili and Gandria will be part of the FLNG subsidiary wehave modelled lower opex as we expect cold lay-up up until FLNG conversion contracts are secured.
• FLNG: In March GLNG said the FLNG subsidiary will be launched within the next 1-2 months, a near term trigger in our view. Furthermore, steel cutting on the first FLNGshould start June/July granted successful feed. Industrysources also say regas capacity will be added on the 4 LNG vessels with 2014/15 delivery, increasing fleet flexibility.
• Valuation: Our USD 46/sh target reflect USD 250m/USD 400m drop down value of LNG/FSRU vessels.
We reiterate BUY and USD 46 target ahead of the 1Q13 report as we believe milestone triggers are approaching.
Golar LNGSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 46 (unchanged)
Company descriptionBermuda/Oslo based LNG and FSRU operator. Golar LNG will operate short term LNG shipping and LNG cargo trading and develop long-term contracted LNG mid-stream projects to be offered to Golar MLP, its 65% owned dividend vehicle. Listed at OSE and Nasdaq.
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From downside to upside focus GOGL is expected to report 1Q13 numbers on May 31st, prior to Oslo stock market opening. A milestone quarter has been completed, finally with focus shifting to growthfrom counterparty risk. Proceeds from termination of thelegacy orderbook will provide additional fire power togrow the fleet, secured by refund guarantees. GOGLappears highly attractive on mid-cycle earnings, consequently we reiterate BUY and USD 1.5/sh target.
• 1Q13 numbers: We expect revenue of USD 44m and EBITDA of USD 22m, slightly lower than 4Q12 and the inline with the comments by the board expecting “slightlylower” q/q development. Consensus expects revenue of USD 47m and EBITDA of USD 20m, hence, we expectGOGL to beat expectations in 1Q13.
• Growth modus: GOGLsaid in the 4Q12 report that it intends to growth the Company going forward, both secondhand and newbuilds, including distressed corporate deals. The order of 2 Supramax newbuids for USD 55m was thefirst step, which should generate ~13% unleveragedreturns based on 20 year average rates of $16,000/daybefore considering fuel savings. Assuming $3,000/day fuelsavings and 70% leverage the vessels would generate 10% free cash flow to equity on current 1 year spot earnings.
• Valuation: We estimate current NAV at NOK 4.6/sh, following higher asset values. More importantly, EV/EBITDAon 20 year average rates of 2.8x is attractive in our view.
We reiterate BUY and USD 1.5/sh target price.
Golden OceanSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 1.5 (unchanged)
Company descriptionBermuda/Oslo based drybulk company operating in the larger segments. A spin off from tanker company Frontline in Feb. 2005. Restructured in Mar. 2009.
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Loss of Libra in 1Q13 Hoegh LNG will report their 1Q13 May 23rd. We expect significantly lower earnings due to LNG Libra being idle,another delay for the FLNG spin off and do not expectthe Company to exercise the option to acquire STXFrontier due to lower rates.
• 1Q13 numbers: We expect revenue of USD 28m and EBTIDA of USD 6m vs. consensus at USD 32m and USD11m respectively. EBITDA is down 50% q/q as LNG Libracompleted its USD 6m/quarter contract, and has sincebeen idle. We also expect somewhat higher operatingexpenses as the Company has covered LNG Libra expenses during the quarter previously covered by the client.
• Negative focus on spot vessels: We estimate the current idle cost of LNG Libra at ~$40,000/day. The LNGtanks are likely close to warm and consequently we expectthe Company to idle the vessel to reduce cost to ~$2,500/day during 2Q13 unless sold near term. TheNorman Lady contract will also expire in 3Q13, due to oldage (1973 built) and spot competition from other vesselsthe best case is contract extension at lower rate, in ourview. Nevertheless, both vessel contracts have limited impact on valuation, but focus could weigh negatively.
• STX Frontier: We believe HLNG requires ~$90,000/day for ~5 years to comply with the CMD guidance of 12%unleveraged returns. Competitors relying on contract priorto summer to secure financing will likely underbid this.
We reiterate NEUTRAL and USD 12 target price.
Hoegh LNGSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (USD): 12.0 (unchanged)
Company descriptionHöegh LNG is a fully integrated LNG transportation and services company operating a fleet of 7 LNG carriers including 2 Shuttle and Regasification Vessels (SRVs). The orderbook consists of 3 FSRUs on contract.
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Analyst: Frode Mørkedal Tel: +47 22 01 63 27 E-mail: [email protected] Next report date: 08.05.2013 Disclosure: RS Platou Markets Inc. (a wholly owned subsidiary of RS Platou Markets AS) acted as Sole Manager and RS Platou Markets AS acted as Placement Agent in the USD 100 million directed equity offerings completed in February 2013.
According to plan NNA has been through a busy quarter with equity raise,vessel acquisitions and delivery of vessels. We expectthe Company to report 1Q13 EPS marginally aboveconsensus. We reiterate BUY and USD 5 target as wefind NNA a good asset play on a product tanker recovery with low operational risk and high financial leverage.
• 1Q13 numbers: We expect revenue of USD 43m and EBITDA of USD 27m, slightly below consensus expectationsof USD 45m and USD 28m respectively. However, we lookfor EPS of $-0.003 to be marginally better than consensus $-0.05. We expect the fleet to have grown by 2 vessels q/qto 20.2 vessels. Both we and consensus expect fixeddividend of USD 0.05/share, or ~6% annualised.
• Growth: NNA recently acquired 5 MR product tankers for USD 144m, with 60% leverage another ~USD 40m of equity is available from the recent USD 100m issue.
• Valuation: We estimate current NAV of $2.4 per share. However, with mid-cycle values the NAV moves to $5.0 per share, our target, which also reflects 6x ‘15e EV/EBITDAassuming 20 year average MR rates ($18,500/day). Onecould argue that based on fleet age of 4.5 years in 2015, the fair multiple is 7.9x which would give a USD 10 targetin 2015. We also highlight the attractive dividend yield ofcurrently 6% fully financed by operational cash flow. With20 year average rates in 2015, there is a potential todividend out 60% of the current market cap.
We reiterate BUY and USD 5/sh target price.
Navios Maritime AcquisitionSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 5.0 (unchanged)
Company descriptionOwner and operator of tanker vessels focusing on petroleum products and bulk liquid chemicals. 7 VLCC on long-term contracts, 7 LR1, 6 MR and 2 chemical (25k dwt). Newbuild program of 12 ships, mainly MRs.
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Improved quarter but still weak Neptune Orient Lines is expected to report improvedquarterly results vs. last year but also from 4Q12. Thatsaid, we have adjusted our full year 2013 estimatesdownwards due to the weaker than expected start of theyear. We find valuation unattractive on 2013 estimates but fair on 2014 estimates, hence we reiterate Neutral.
• 1Q13 expectations: We look for 1% decline in average freight rates to $2394/FEU. Volumes are expected to beflat. In 4Q12 the Company surprised (negatively) with ahigher reliance on Intra-Asia trades which saw volumes improve 17% q/q. This trade lane is expected to staydepressed in 2013 as cascading vessels from the mainEast-West trade lanes end up pressuring Intra-Asia rates. We look for 1Q13 EBITDA of USD 44m, up from USD 17min 4Q12 and USD -151m in 1Q12.
• Full year estimates: We factor in Asia-Europe spot rates of $1300/TEU for 2013 and Asia-USWC of $2300/FEU. We look for NOL average freight rates to drop 5% y-y. We factor in 10% increase in volumes reflecting 3% increase inthe fleet and average 12.8 voyages per ship, which is upfrom last year reflecting changing trade mix with moreshort-haul Intra-Asia trades. We lower our full year EBITDA from USD 555m to USD 319m. Consensus is at USD 600m.
NOL trades with high earnings multiples but should be supported by NAV on the downside, and the eventual recovery of the container ship market into 2014. We reiterate Neutral.
Neptune Orient LinesSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (SGD): 1.2 (1.2)
Company descriptionNOL is one of the largest container shipping companies with principal activities in Container shipping, Logistics and Terminal operations. Listed on Singapore exchange under the ticker NOL SP.
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Neptune Orient Lines Straits Times Index (Rebased)
Upgrade to neutral We upgrade NAT to NEUTRAL following the equity raise,alignment of CEO incentives with other shareholders, and growth clearly on the agenda with recentinvestments. However, we highlight that 1Q13 will missconsensus expectations while dividends continue to befunded by equity raises.
• 1Q13 numbers: We expect revenue of USD 17m and EBITDA of negative USD 2m vs. consensus expecting USD20m and zero respectively. NAT guides EPS adj. “slightly”lower in 1Q13 q/q in the prospectus relating to the recentUSD 88.3m equity raise (net of expenses).
• Equity raise: NAT recently issued 9.75m new shares at USD 9.6/sh for growth and general corporate purposes.The CEO subscribed to 1.6% of the shares, lower than the2% Scandic American which was sold to NAT for USD 25mrecently, was entitled to receive. Nevertheless, the equityraise allows NAT to continue paying dividends not funded by operational cash flow and opens for further growth fleetgrowth which will increase dividends when rates recovers.
• Fleet growth: NAT recentlyacquired its 21st Suezmax vessel, a 2013 Korean built vessel to be delivered not later than May. We estimate that NAT can acquire 2-3 Suezmax vessels with 50-60% debt over the next 12-18 months.
• Valuation: We estimate NAV at USD 7.5/sh, however, with EV/EBITDA of ~4x on 20 year average rates in 2015 weupgrade to NEUTRAL as we expect rates to bottom in 2013. Average Suezmax rates since 1990-2012 have been $28,000/day (nominal), which support 5 year old Suezmaxvalues of USD 58m, a level which would lift NAV to $10/sh.
We upgrade to NEUTRAL with target USD 10 per share.
Nordic American TankersSector: Marine
Recommendation: NEUTRAL (Sell)
Target price (USD): 10.0 (7.0)
Company descriptionBermuda based tanker company operating 21 Suezmax vessels . All vessels operating in the spot market. Established in 1995.
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Analyst: Frode Mørkedal Tel: +47 22 01 63 27 E-mail: [email protected] Next report date: 31.05.2013 Disclosure: RS Platou Markets acted as joint lead manager and bookrunner in the private placement of shares conducted in November 2012.
Waiting for growth We expect another decent quarter, only tempered by alower USD/NOK exchange rate.
• 1Q13 expectations: With USD/NOK at 5.63, we expect revenues of NOK 110m and EBITDA of NOK 54m, downfrom NOK 57m in 4Q12. NOCC Caribbean was sold in theprior quarter but the number of vessel days should partlybe compensated by the new Ocean Challenger fromFebruary 2013. We have conservatively assumed unchanged G&A of NOK 10m in the quarter although theCompany has plans to reduce this to around NOK 9m bythe end of the year. We look for net profit of NOK 5m.
• Softer market: Activity in the charter market during 1Q13 was softer as operators found little need to secure additional tonnage as their volumes declined amid sharplylower exports out of Korea and Japan. A weakening Yenand a new fiscal year from April 1 should hopefully lead toimproved activity ahead. NOCC will get their NOCC Oceanic (2012 built 6,500 CEU) open from August. With currentcharter rates at $23,500 per day, we assume NOCC will beforced to accept a lower rate than the current $26,500/day– we have assumed $25,000/day. That said, we note thatonly 3 larger vessels are available in the spot market this year which mitigate the rate reduction risk.
• Growth? As highlighted in our 4Q12 review note, we expect NOCC to have NOK 75m of free cash forinvestment. With sale of non-core vessels Helena, Coraland Caribbean, they should release an additional NOK90m, enough to acquire a newbuild post-Panamax vessel. However, we also expect the Company to be looking forsecond-hand vessels with cash flows.
We reiterate BUY NOK 2.5 reflecting 7.7x ‘14e EBITDA.
Norwegian Car CarriersSector: Marine
Recommendation: BUY (unchanged)
Target price (NOK): 2.5 (unchanged)
Company descriptionPure play tonnage provider of car carriers formed after a merger between Eidsiva Rederi and Dyvi Shipping in 2010. Operates a fleet of 14 PCTC/Ro-Ro vessels. Shares listed on Oslo Stock Exchange under ticker NOCC.
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Company data (2013E)Share price (NOK) 1.60No. of shares (m) 242.2Market cap. (NOKm) 388Net debt YE (NOKm) 1 301Enterprise value (NOKm) 1 780
Description of adjustments: Sale of assets, agio/disagio and gain/losses on financial instruments. Full year 2009 and 2010 figures are proforma as if merger was concluded 1.1.2009
Improved quarter expected On the back of a strong clean petroleum productsmarket, we expect Odfjell to outperform Stolt-Nielsen in the first quarter of 2013.
• 1Q13 expectation: Although Stolt-Nielsen disappointed with weaker than expected figures in its Dec-Feb quarter (volumes declined 2.9% and rates fell 1.8%), we expectOdfjell to report better Jan-Mar figures because of itshigher reliance on the spot market. The fact that Odfjellalso carries more CPP should be beneficial given the strongMR rates seen in 1Q13. We therefore expects Odfjell to report an improved quarter with chemical tankerscontributing EBITDA of USD 22m (+6% higher rates) andterminals USD 6m and LPG at USD 2m. Total EBITDAexcluding gains therefore expected at USD 30m vs. USD22m in the prior quarter.
• Valuation: We find valuation attractive at P/NAV 0.69x and EV/EBITDA 7.3x ‘14e and 6.4x ‘15e which reflectsexpectations of +8% and +9% higher rates in 2013 and2014, respectively.
• Balance sheet: Available liquidity was USD 267m pro forma by 4Q12. Assuming 65% bank financing on the four 46,000 dwt Hyundai Mipo newbuilds due 2014 andrefinancing of maturing bank balloons, the balance sheet issolid. We expect Odfjell to continue expanding within LPGand chemical tankers while the Terminals should be self-sufficient for the known expansion plans.
Odfjell has higher spot exposure than Stolt-Nielsen and should therefore see earnings grow faster once the market turns up in earnest. We reiterate BUY.
OdfjellSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 6.0 (unchanged)
Company descriptionOdfjell is a leading company in the global market for transportation and storage of chemicals and other speciality bulk liquids. Established in 1916 and based in Bergen. Listed at OSE under the ticker ODF and ODFB.
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Odfjell
OSEBX index (Rebased)
OSE Transportation (Rebased)
Shareholders Shares VotesNorchem ApS 39.5 % 39.5 %Odfjell SE 8.2 % 8.2 %Rederiet Odjfell AS 5.3 % 0.2 %JP Morgan Clearing 4.0 % 4.0 %Free Float 60.5 % 60.5 %
Softer 1H results expected Orient Overseas (OOIL) is expected to report 1H13results lower both y-y and p-p. We reiterate our NEUTRAL recommendation.
• 1Q13 trading preview: We expect OOIL to have obtained 2.3% lower freight rates in 1Q13 vs. 4Q12, mainly due toweaker Intra-Asia rates. For 1H13 we expect steady y-y rates but 3% lower than 2H12. We look for EBITDA of USD 151m in 1H13 vs. USD 273m in 2H12. We expect higherbunker costs and cargo costs to weigh negatively.
• Intra-Asia: OOIL’s most important trade lane is Intra-Asia (52% of the trade mix). Rates have been pressured during1Q13 and there are expectations that the trade lane willsuffer from the cascading of larger vessels from the mainEast-West trade lanes. A Maersk Line official was in thenews predicting a rate war between the Intra-Asia operators as a result. The OOIL stock has declined since we changed from BUY to Neutral in February partly because ofthis fear, in our view. OOIL has a solid balance sheet withUSD 2bn of cash available enough to cover remainingcapex of USD 1.3bn and maturing debt. With NAV of HKD70 per share (incl. HKD 19 per share in surplus value of theoperations), we find the downside risk as limited butexpect few triggers on the upside until the container shipmarket fundamentally improves into 2014.
We reiterate Neutral; the container market is still a year away a meaningful recovery and valuation looks fair.
Orient OverseasSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (HKD): 54 (54)
Company descriptionOOIL has principal activities in container transport and logistics services. OOCL, OOIL's wholly owned subsidiary, is one of the world’s largest integrated international transportation, logistics and terminal companies. Listed in Hong Kong under the ticker 316 HK.
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Well positioned for growth Pacific Basin is expected to report lower results in 2013than what consensus is currently expecting. On thepositive side the stock market appears to look past the trough year and is discounting a recovery to mid-cycle valuation of HKD 5/sh. We reiterate Neutral.
• 1H13 trading: Pacific Basin only reports semi-annual results but will provide a quarterly trading update. As ofFebruary, the Company had fixed 55% of Handysize days at $9,340/day, well above the expected spot market ratesfor these vessels of $7,000/day. The Handymax fleet wassecured 80% at $10,620/day, also above the expectedspot market for 2013. In our estimates we assume PacificBasin will continue to add vessel days with $3,000/day trading margin. Our 2013e EBITDA of USD 93m is howeverbelow consensus average of USD 137m.
• Valuation: We calculate current NAV at HKD 3.75 per share. With the average values since 2000 for Handysizevessels (5 year olds) of USD 24m, the NAV would be HKD5.1 per share. Given that the stock is trading at aroundHKD 4.6 per share we find that most of the upside has already been priced in.
Near term earnings are weak but the strong balance sheet (USD 700m of cash) and a dry bulk market closer to cyclical recovery are reasons to be optimistic, henceNeutral recommendation.
Pacific BasinSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (HKD): 5.0 (5.0)
Company descriptionA leading owner and operator of modern Handysize and Handymax dry bulk vessels with active interests in other shipping segments such as Towage and RoRo. Listed in Hong Kong under the ticker 2343.
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Share price (HKD) in Pacific Basin relative to key indices
A quarter few can match Few peers can match the aggressive expansion pace STNG has been through over the last 4 months, addingabout USD 300m of capex per month. The Company hasdelivered on raising equity and putting money to work,what remains is securing vessel debt. This should befocus on the report, but news prior to the 1Q13 report is likely as Management already indicated potential forincreasing the USD 267m facility as DVB Bank joined thesyndicate. We expect STNG to continue the consistentstrategy of growing the eco-design fleet at a cyclicallow, with values already increasing from through levels.
• 1Q13 numbers: We expect STNG to report USD 48m of revenue and USD 12m of EBITDA, in line with consensusexpecting USD 46m and USD 12m. Management said on arecent conference call that 1Q13 consensus EPS of USD 0.05/sh was “appropriate”, consequently we do not expectany significant earnings surprises on the report. Weestimate USD 0.06/sh EPS, marginally above consensus.
• Fleet update: STNG took delivery of another 2 MR eco vessels in 1Q13, and we expect to see a consistentoutperformance compared to old design.
• Growth: USD 0.6bn of equity has been raised since December, 36 vessels has been ordered for USD 1.3bn,meaning that another USD 70m of equity is available for growth assuming 60% debt financing.
• Valuation: Our USD 13/sh target reflects 7.9x EV/EBITDA in 2015 on 20 year average rates.
We reiterate BUY and USD 13/sh target price.
Scorpio TankersSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 13.0 (unchanged)
Company descriptionSince its IPO in March 2010 the Company has grown its pure play product tanker fleet from 3 owned vessels to 53 currently, of which 46 are fuel-efficient and 39 still to be delivered.
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RS Platou Markets AS acted as placement agent in the registered direct offering of USD 27 million in equity conducted in April 2012 and in the registered direct offering of USD 132 million in equity conducted in December 2012. In addition, RS Platou Markets, Inc. (wholly owned subsidiary of RS Platou Markets AS) acted as Sole Manager and RS Platou Markets AS acted as Placement Agent in the registered direct offering of USD 230 million in equity conducted in January 2013 and as Sole Manager/Lead Placement Agent in the registered direct offering of USD 235 million in equity conducted in March 2013.
Will dividends be increased again? We expect Ship Finance to report 1Q13 numbers end-May. During the quarter SFL issued a USD 350mconvertible bond at 3.25% and with historical double digit ROE growth, it is evident how value is created forshareholders. • 1Q13 numbers: We expect revenue of USD 69m and
EBITDA of USD 43m, down 11%/14% respectively. Lowerrevenue is due to USD 8m lower cash compensation from FRO as a result of a weaker crude tanker market q/q.
• Higher dividend: Historically SFL has raised dividends following acquisitions. The 2 car carriers acquired in 4Q12was fully operational in 1Q13, generating annual cash flowof ~USD 5m, which could lift dividends by USD 0.015/sh. One could also argue for higher dividend capacity as SFLrepaid the 8.5% bond with proceeds from the convertiblebond, reducing annual interest cost by ~USD 14m.
• Growth potential: We estimate USD 250m available equity for fleet expansion following the USD 89m equity raise, USD 70m liquidity effect from disposal of FROvessels and USD 100m larger than planned bond issue.Deploying this cash will be accretive on dividends with atrack record of 13-22% free cash flow to equity yield the last 2 years. On a fully invested basis the dividends shouldgrow by USD 0.4-0.5/sh, increasing dividends from USD 1.56/sh currently to above USD 2/sh, or 11-12% yield vs. historical yield valuation of 7%.
We reiterate BUY and USD 22/sh target price.
Ship FinanceSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 22 (unchanged)
Company descriptionBermuda based company leasing out tankers, offshore support vessels, drilling units and containers to among others Frontline and Seadrill. Almost 100% contract coverage with 10 years remaining charters and EBITDA-backlog of just below $5bn. Listed at NYSE
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Company data (2013E)Share price (USD) 17.44No. of shares (m) 85.2Market cap. (USDm) 1,486Net debt YE (USDm) 1,547Enterprise value (USDm) 4,470
Description of adjustments: Sale of assets, agio/disagio and gain/losses on financial instruments. Adjusted EBITDA and Adjusted EBIT includes repayment of financial leases and 100% of the unconsolidated rig subsidiaries. Other figures as reported.
Downgrade to Neutral Since we initiated coverage of GASS in June 2012, thestock has surged 112%. While we still believe the stockis attractively positioned in an improving LPG market,we downgrade to Neutral with target USD 12 per sharereflecting 7x ‘13e EV/EBITDA, which we find fair.
• 1Q13 expectations: We look for steady revenues of USD 27m and EBITDA of USD 17m marginally above consensusexpectations of EBITDA at USD 16m.
• Cash flows: Operating cash flow is expected to stay around USD 14-15m per quarter in 2013. Debt repaymentsare USD 9m per quarter, hence StealthGas is adding to itscash position of USD 42m every quarter.
• Valuation: We calculate current NAV at USD 8.5/share. This reflects USD 16m for a five year old 5,000 cbmpressurized vessel (or USD 12m for 10 years old), the same as the average value since 1994 and reflects break-even rates of $10,000 per day (11% discountrate).Granted, today’s market is stronger than in manyyears and is likely to stay so for the next couple of years.Average value during 2005-2008 was USD 21m for a five year old vessel. This would give 21% higher asset valuesand a NAV of USD 12.1/share. At this target, 13e EV/EBITDA would be 7.1x and 8.5x P/E. Given the average age of the fleet of 10 years, we find this to be fair multiples.
We change to NEUTRAL as we find valuation fair. Further investments that lower the age of the fleet would be a positive and the main trigger for the shares, in our view.
StealthGasSector: Marine
Recommendation: NEUTRAL (Buy)
Target price (USD): 12.0 (10.0)
Company descriptionAsset provider owning 37 LPG carriers in the 3,000-8,000 cbm segment in addition to 3 modern MR product and 1 Aframax tanker. US listed with ticker GASS.
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StealthGas
S&P 500 Index (Rebased)
OSE Transportation (Rebased)
Shareholders Shares VotesHarry Vafias 19.9 % 19.9 %Tsaousoglou C. 9.5 % 9.5 %Zesiger Capital 9.0 % 9.0 %
Changed from dividends to growth Teekay Tankers changed its dividend policy in 4Q12,moving from a variable dividend to a fixed (lower)dividend payment of 3 cents per quarter (~4.5% annualyield). Instead the company will focus on growing thefleet at historically low vessel values.
• 1Q13 expectations: We assume Suezmax and Aframax spot rates of $13,000 and $11,000 per day, respectively.This should result in revenues of USD 44m and EBITDA ofUSD 15m. In 4Q12, TNK wrote down book vessel values byUSD 353m, which will reduce 1Q13 depreciation by USD5m to USD 13m. We estimate operating profit of USD 2m and net profit of USD -3m. EPS expected at $-0.04.
• From dividends to growth: With the new fixed dividendpay-out of 3 cents per quarter starting 1Q13, TNK hasmoved from a dividend play to growth. TNK announced inApril 2013 that it had ordered 4 fuel efficient LR2 producttankers at STX of Korea for USD 47m each with deliverylate 2015/early 2016. The Company also secured fixed-price options for another 12 LR2 newbuilds. The growth willbe funded by existing liquidity of USD 327m.
• Valuation: Current NAV is $1.8/share. However, including the 12 newbuild options, and assuming 12% higher assetvalues, NAV would increase to $4/share. This would reflectvalues for 5 year old MRs of USD 29m, LR2 of USD 36mand Suezmax of USD 49m.
We reiterate BUY on TNK with target USD 4 per share. We find TNK as an attractive bet on the tanker cycle with a strong balance sheet and built in growth with a quarterly dividend payment.
Teekay TankersSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 4.0 (unchanged)
Company descriptionSpin off from Teekay Corp owning 10 Suezmax, 12 Aframax, 3 LR2 and 3 MR product tankers plus 50% ownership in VLCC newbuild. TNK is regarded as a dividend play.
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Improved earnings expected Thoresen Thai is expected to report higher earnings forthe quarter ended March 2013 (fiscal 2Q13) driven by improved Supramax bulk earnings and higher Mermaidcontribution.
• 2Q13 expectations: We look for Supramax earnings of $8,000 per day and unchanged owned fleet of 16Supramax vessels and 13 charter-in vessels. This should result in THB 241m vessel EBITDA (before G&A) from drybulk, up from THB 175m in 1Q13. We assume improvedutilization of the Subsea fleet (60% vs. 51% in 1Q13) while one of the two Drilling barges (MTR2) is assumed offhirethroughout the quarter. This gives Mermaid EBITDA beforeG&A of THB 493m vs. THB 433m in 1Q13. Mermaidrecently fixed out the MTR2 for two years at implied day rate of $100,000/day. This should lift earnings from 3Q13onwards. Baconco and UMS which had bumper quarters in1Q13 are assumed to report lower figures and margins.Overall we look for total consolidated vessel EBITDA of THB901m vs. THB 843m in 1Q13.
• Valuation: We calculate NAV of THB 12.7 per share with Mermaid and UMS at stock market value. If dry bulk assetvalues reach mid-cycle (20 year average) values (e.g. Supramax 5 year old at USD 28m), then NAV improves toTHB 17 per share. Given our increased Mermaid earnings estimates, we have lifted our target to THB 18 per sharereflecting 7.4x ‘13e EV/EBITDA.
We reiterate our Neutral recommendation given the current valuation of the shares.
Thoresen Thai AgenciesSector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (THB): 18.0 (17.0)
Company descriptionIntegrated shipping group based in Thailand, having interests in dry bulk shipping, oil and gas services, coal mining and logistics segments. TTA is listed on the Stock Exchange of Thailand under the ticker TTA TB.
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Lower results on weaker volumes We expect WWASA to report declining results both y-y and q-q due to the weak car exports seen during 1Q13.
• 1Q13 expectations:WWASA is expected to report May 8, 2013. We look for total EBITDA of USD 109m vs. USD119m in 4Q12 and USD 140m in 1Q12. The main reason for the lower results is the declining Korean car exports.
• Korean car exports: At time of writing only Jan and Feb data was known. On average Korean car exports declined9% y-y and 6% q-q. We believe last year’s strong car exports from Korea to North America reflected build-up of inventories. Inventory reports show that Korean cars onstock have grown from an average 29 days of supply in thefirst 9 months of 2012 to 55 days of supply on March 1 thisyear. That corresponds to approx. 100,000 more unsold Korean cars on stock than a year ago. This growth ininventories is made out of imported cars as demand forlocally produced cars matched local transplant production.
• Our estimates: We look for 11% decline in volumes y-y as H&H volumes likely declined as well. We expect 9%decline in 2Q13 before a recovery with 1% and 3% y-y growth in the final two quarters. This results in full yearvolume decline of 4% vs. +5% in 2012. Still, bunker priceswhich averaged $655/ton last year is likely to be lower this year (we assume $640/ton). Overall we factor in EBITDA ofUSD 490m for 2013 vs. USD 583m in 2012. By comparisonconsensus expects USD 548m for 2013.
We estimate NAV of NOK 59/sh. However, given the likely negative estimate revisions by consensus, we reiterate Neutral.
Wilh. Wilhelmsen ASASector: Marine
Recommendation: NEUTRAL (unchanged)
Target price (USD): 10.0 (unchanged)
Company descriptionGlobal car and ro-ro shipping operator with integrated logistics solutions from factory to dealer.
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Company data (2013E)Share price (NOK) 49.40No. of shares (m) 220.0Market cap. (USDm) 1 899Net debt YE (USDm) 1 166Enterprise value (USDm) 3 505
Description of adjustments: Sale of assets, agio/disagio and gain/losses on financial instruments. P&L based on Management report. Adjusted Enterprise Value with non-consolidated debt.
Strong valuation backing While WWI is expected to report declining profits due tolower contribution from WWASA, the valuation of the WWI shares remain highly attractive, and with improvedmarkets for shipping and maritime services in the nextcouple of years, we reiterate our BUY recommendation.
• 1Q13 results expectations: We look for WWASA to contribute with EBITDA of USD 109m, about USD 10m lower q-q due to weaker volumes. WMS is expected to report rather steady EBITDA of USD 24m, thus after USD -6m from Holding, we look for EBITDA of USD 132m.
• WMS:The Maritime Services segment should continue to benefit from growth in world trade and the related shippingservices (marine products used onboard ships, crewing,technical services, ship agency, etc). This is the onlybusiness WW Holding owns 100% and is expected to remain so, although it could open for partnerships withinindividual business areas. Near term, however, weaknessin the shipping markets has resulted in lower EBIT-margins (7% in 4Q12 vs. 9% long-term target). We look for unchanged EBIT-margin in 1Q13 of 7%.
• Other activities: WW Holding Invest currently holds 8% of Qube Logistics of Australia and 35% of NorSea Group.
We reiterate BUY on WWI due to its attractive valuation.SOTP is currently USD 43 per share with WWASA at market. Our USD 37 target implies 15% discount and5.5x ‘13e EV/EBITDA.
Wilh. Wilhelmsen HoldingSector: Marine
Recommendation: BUY (unchanged)
Target price (USD): 37 (unchanged)
Company descriptionLeading global maritime industry group with long Norwegian tradition. Ranks as the world's largest operator in the roll-on, roll-off cargo segment and controls together with partners 130 vessels. Listed at OSE under the ticker WWI and WWIB.
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Wilh. Wilhelmsen Holding
OSEBX index (Rebased)
OSE Transportation (Rebased)
Shareholders Shares VotesTallyman AS 59.2 % 59.2 %Odin Funds 3.8 % 3.8 %Government Pension Fund Norway 3.0 % 3.0 %
Company data (2013E)Share price (NOK) 165.00No. of shares (m) 46.5Market cap. (USDm) 1 340Net debt YE (USDm) 1 127Enterprise value (USDm) 2 908
Description of adjustments: Sale of assets, agio/disagio and gain/losses on financial instruments. P&L based on Management report. Adjusted Enterprise Value with non-consolidated debt.
RS Platou Markets AS is limited liability company incorporated in Norway (reg.no 942 274 238) and is authorised to provide banking and investment services in accordance with and pursuant to the Norwegian Securities Trading Act of 2007. RS Platou Markets AS is a subsidiary of RS Platou ASA, parent company in the RS Platou ASA Group, which comprise a full service international ship and offshore brokerage and securities. RS Platou Markets AS is under the supervision of the Norwegian Financial Supervisory Authority (Nw.: “Finanstilsynet”) and is a member of the Norwegian Securities Dealers Association (Nw.: Norges Fondsmeglerforbund). Internal rules have been developed in accordance with recommendations issued by the association. Important Information
This report is provided by RS Platou Markets AS and has been prepared by its equity research department solely for general information purposes to professional investors only. The report does not constitute and will not form part of and should not be construed as a solicitation of any offer to buy or sell any security, commodity or instrument or related derivative or to participate in any trading or investment strategy. This report is based solely on publicly available information. All information, including without limitation statements of fact, contained herein has been obtained and compiled in good faith from third party sources believed to be reliable, but has not been subject to independent verification. RS Platou Markets AS does consequently not make any undertaking, representation or warranty, express or implied, with respect to the accuracy or completeness of the report. The report is not to be relied upon as authoritative and should not be regarded as a substitute for the exercise of reasoned and independent judgement by the investor. Unless otherwise stated on the first page, the publication or report has not been reviewed by the company or companies in question before dissemination. In instances where all or part of a report is presented to the company or companies included in this report prior to publication, the purpose is to ensure that facts are correct. Estimates provided in this report are prepared by employees of RS Platou Markets AS’ equity research department. Please note that all prices and special levels are indicative, and may not be up to the date specified in this report. The opinions and estimates contained herein represent the view and judgment as of the dates specified (and in absence of such as of the date of the report), and are subject to change without notice. Delivery of this report shall not create any implication that RS Platou Markets AS assumes any obligation to, update or correct the information herein. The report contains certain forward-looking statements relating to the business, financial performance and results of the relevant issuers and/or industries and markets. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. Any forward-looking statements and other information contained in this report, including assumptions, opinions and views cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. Neither Platou Markets nor any of its affiliates or employees provide any assurance that the assumptions underlying such forward-looking statements are free from errors nor do any of them accept any responsibility for the future accuracy of the opinions expressed in this report or the actual occurrence of the forecasted developments. Platou Markets does not assume any obligation to update any forward-looking statements or to conform these forward-looking statements to actual results. Please note that past performance of a company or financial instrument is not necessarily a guide to future performance.
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This report has been prepared without regard to any particular investors’ objectives, financial situation or needs, anddoes not provide individually tailored investment advice or offer tax, regulatory, accounting or legal advice. The securities discussed in this report may not be suitable for all investors. This report has been prepared and issued for distribution to professional investors only and all recipients should seek independent investment advice prior to making any investment decision based on any information contained in this report. Prior to entering into any proposed transaction, recipients should determine, in consultation with their own investment, legal, tax, regulatory and accounting advisors, the economic risks and merits, as well as the legal, tax, regulatory and accounting characteristics and consequences, of the transaction.
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Neither RS Platou Markets AS nor any of its parent or subsidiary undertakings or any such person’s affiliates, officers, employees or advisers accept any liability whatsoever as to any errors, omissions or misstatements contained herein and, accordingly, expressly disclaim any and all liabilities for any and all losses (whether direct or indirect) related to investments caused by or motivated by this report or information included herein. Any person receiving this report is deemed to have accepted this disclaimer which shall apply also should the estimates or opinions shown turn out to be to erroneous or incomplete or based upon incorrect or incomplete facts, interpretations or assessments or assumptions by RS Platou Markets AS, and irrespective of whether RS Platou Markets AS or any person related to RS Platou Markets AS are at fault.
Risks related to investments and recommendations
Any investment involves risks, such as the risk of no yield or the risk of losing the capital invested. Several factors could cause the actual results, performance or achievements of the companies and instruments described herein to be materially different from any future results, performance or achievements that may be expressed or implied by statements and information in this report, including, among others and without limitation, risks or uncertainties associated with the companies’ business, segments, development, growth management, financing, market acceptance and relations with customers. More generally an investment will involve risks related to general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, fluctuations in currency exchange rates and interest rates and other factors. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report. Some investments discussed by Platou Markets have high volatility and may therefore experience sudden and large changes in value that may cause. International investing may include additional risks related to political and economic uncertainties as well currency risk.
The analyst’s assessment of risk is identified by the following terms: High risk The share is likely to be considerably more volatile than the general index. The reason may be the
characteristics of the company or the company’s industry, or issues associated with the share as a security, such as a recent listing, a limited free float or the expectation of corporate action.
Medium risk The share is expected to be about as volatile as the general index.
Low risk The share is expected to fluctuate less than the general index, and the Company, the share or the industry has inherent characteristics that reduce the expected volatility of the share price.
The opinions and views contained herein are based on numerous assumptions as described in this report. Different assumptions could result in materially different results. Furthermore, the assumptions may not be realized.
Basis and methods for assessment
Recommendations in respect of shares and share related instruments are based on estimates using various valuation methods. These methods include analysis of earnings multiples, valuation of a company using discounted cash flow calculations and net asset value assessments. RS Platou Markets AS’ research department operates with 3 recommendation categories based on the expected absolute return within 6 months: Buy The return is estimated to be in excess of 15%. Neutral The return is estimated between 15% and minus 5%. Sell The return is estimated to be less than minus 5%.
Planned updates
There is no fixed schedule for updating the research included in this report. However, Platou Markets aims to update recommendations on a company when:
• The price target is achieved
• New accounting figures are released
• Any material news on a company or is industry is released
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Prevention of conflicts of interests and authors independence
RS Platou Markets AS aims always to operate in compliance with appropriate business standards, including with respect to conflicts of interests and the content of reports produced by investment firms and other relevant standards. To limit possible conflicts of interests, the analysts within RS Platou Markets AS equity research department are separated from the corporate finance department in order to control the flow of information (“Chinese walls”) and subject to internal rules on the handling of inside and other confidential information, unpublished research material and contact with other departments. The object of the internal rules is to ensure that no analyst will abuse or cause others to abuse confidential information. The analyst(s) involved in the preparation of the various research included herein has not at the same time been involved in corporate assignments for companies described by him or her. The analysts have not been, nor are or will be, receiving direct or indirect compensation in exchange for expressing any of the views or the specific recommendations contained in the report. The analysts of RS Platou Market AS’s equity research department are eligible to remuneration from RS Platou Market AS’s general bonus scheme.
Share ownership and investment banking services
RS Platou Markets AS does not alone or together with affiliated companies hold more than 5% of the total share capital of any company on which it issues research. RS Platou Markets AS and its affiliates (and/or their employees) may, however, have investments in companies/financial instruments (or derivative thereof) featured in this report or have other financial interests in transactions involving these companies/financial instruments. In addition, RS Platou Markets AS may have or has acted as manager for and provided investment banking services to a number of companies mentioned in this report. In light of the broad range of financial services and ship brokerage activities offered and provided by RS Platou Markets AS and the RS Platou ASA Group, however, it can be assumed that RS Platou Markets AS and its affiliates may currently and may in the future be providing or aim to provide investment banking or other financial services of a confidential nature (and consequently not referenced herein or on the mentioned web site) to or on behalf of the issuers referred to in this report. For an overview of RS Platou Markets AS’ and/or its employees’ positions in financial instruments in addition to an overview of the companies to whom RS Platou Markets AS has provided investment banking services to over the latest 12 months, please RS Platou Markets AS web pagewww.platoumarkets.com.
Important Disclosures for recipients in the United States
This research report was prepared for information purposes only by RS Platou Markets AS, a foreign broker-dealer that is not registered in the United States. RS Platou Markets AS’ research reports are intended for distribution in the United States solely to "major U.S. institutional investors" in reliance on the exemption from broker-dealer registration provided by Rule 15a-6 of the United States Securities Exchange Act of 1934, as amended and may not be furnished to any other person in the United States. Each major U.S. institutional investor that receives a copy of a RS Platou Markets AS research report by its acceptance thereof represents and agrees that it shall not distribute or provide copies to any other person. Any U.S. recipient of this research report that desires to effect transactions in any securities discussed within this report should do so through RS Platou Markets, Inc., a U.S. registered broker-dealer and an affiliate of RS Platou Markets AS. All such transactions will be effected pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 and related interpretations. Financial statements included in the report, if any, may have been prepared in accordance with non-U.S. accounting standards that may not be comparable to the financial statements of United States companies. It may be difficult to compel a non-U.S. company and its affiliates to subject themselves to U.S. laws or the jurisdiction of U.S. courts. The analysts whose names appear in this research report certify that all of the views expressed in this research report accurately reflect their personal views about the subject securities or issuers. The analysts also certify that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report.
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The report is not intended for, and must not be distributed to, private customers and investors in the United Kingdom. The information in this report is not intended to be distributed or circulated in any manner in Canada and therefore should not be construed as any kind of financial recommendation or advice provided within the meaning of Canadian securities laws. For further disclosures on methods, risks, potential conflicts of interests etc. and applicable disclaimers relevant for this report and the information contained herein, please see www.platoumarkets.com. All estimates and opinions expressed in this report should be reviewed in conjunction with the information therein. This report may not be copied, reproduced or distributed, in whole or in part, by any recipient for any purpose without the prior written consent of RS Platou Markets AS. If you are not a client of RS Platou Markets AS, you are not entitled to receive this report. Any and all matters relating to this report shall be governed by and construed in accordance with the laws of Norway.